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Senate Critic Now Praises Boeing Chief

WASHINGTON, Aug. 1 — The chief executive of Boeing, W. James McNerney Jr., went before one of the company’s harshest critics on Tuesday and tried to rebuild its reputation.

Mr. McNerney’s appearance before the Senate Armed Services Committee came on a day the committee examined Boeing’s $615 million settlement with the government — the largest ever for a military contractor — that ended several ethics investigations into its dealings with the Pentagon.

“I hope to discuss why, going forward, the Congress and the taxpayers of this country can place their trust in Boeing,” Mr. McNerney said. “Companies doing business with the U.S. government are expected to adhere to the highest legal and ethical standards. I acknowledge that Boeing did not live up to those expectations.”

Since taking over 14 months ago, Mr. McNerney has made ethics and integrity a centerpiece. In questioning by the committee, it appeared that his efforts were beginning to pay off. Even Senator John McCain, Republican of Arizona, who has attacked the company for more than three years, praised “the integrity of the new management team and Boeing and all the changes that are attributable to Mr. McNerney’s leadership.”

To a large extent, actions taken since Mr. McNerney became chief executive have undercut some of the committee members’ anger. Late last week, Boeing announced that it would not seek a tax deduction for the $615 million it has paid to the government — a decision that Mr. McNerney said after the hearing would cost $200 million.

The $615 million settlement ended a three-year investigation and allowed Boeing to avoid criminal charges over accusations that it had improperly acquired proprietary documents from a rival, Lockheed Martin, and had illegally recruited an Air Force weapons buyer who was overseeing Boeing contracts.

When it became clear that the company might be able to use the settlement to reduce its tax bill, a new round of criticism was leveled by Senator McCain; Senator John W. Warner, the committee’s chairman; and Senator Charles E. Grassley, the chairman of the Senate Finance Committee. They argued that using the settlement as a tax deduction would result in taxpayers’ subsidizing Boeing’s wrongdoing.

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In his testimony on Tuesday, Mr. McNerney made the same point. “I wanted to do the right thing,” he said, “and I don’t think taxpayers should pay for the brunt of our wrongdoing.”

In fact, the sharpest questions were directed not at Mr. McNerney, but at Paul J. McNulty, the deputy attorney general, who had negotiated the settlement. Mr. McNulty explained that it was the Internal Revenue Service, not the Justice Department, that determined the tax treatment of any settlement.

Senator Jeff Sessions, Republican of Alabama, said the tax code should then be changed to disallow companies from using government settlements as tax deductions. “Why not do just what McCain said, and make it so these settlements are not tax deductions,” he said.

The improving relations between Boeing and the committee reflect a couple of realities. As the nation’s second-largest military contractor, Boeing is dependent on buying decisions from the committee. In turn, Mr. McCain, who will be its next chairman, has said he wants to overhaul the weapons procurement process — and needs the industry’s help.

“We are going to bring about procurement reform one way or another,” he said. “We’re powerful in Congress and in the executive branch. But we don’t know how much we can achieve unless we work with the corporations that produce. I’d like you to start thinking about that. You can help us a great deal as we face this crisis.”

Under questioning from Mr. McCain, Mr. McNulty said the government was still investigating whether a general with the Air National Guard had been improperly hired by Boeing to work for the company.

A version of this article appears in print on , on Page C2 of the New York edition with the headline: Senate Critic Now Praises Boeing Chief. Order Reprints|Today's Paper|Subscribe